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Question on Chapter 14 Example 1 NPV Answer

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Question on Chapter 14 Example 1 NPV Answer

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by nivlay.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • August 15, 2023 at 4:48 am #689929
    nivlay
    Participant
    • Topics: 1
    • Replies: 1
    • ☆

    Hi Sir,

    Was wondering how tax on saving capital allowance is calculated for this answer. I was unable to figure it out after reading the CF statement. Would be grateful if you could provide this calculation in detail.

    Thank you,

    Alvin

    August 15, 2023 at 7:29 am #689944
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10595
    • ☆☆☆☆☆

    The machine costs 1.8m. CAs on a reducing balance basis are therefore in 000

    1.8 x 0.25 = 0.45
    (1.8 – 0.45) x 0.25 = 0.3375
    (1.8 – 0.45 – 0.3375) x 0.25 = 0.2531 etc

    Tax is saved on these at 25%, so 0.1125 ie 113, 0.084 ie 84, 0.063 is 63.

    In the year the asses is sold a balancing allowance or charge is calculated by comparing the written down value of the asset to the sales proceeds. The tax cash flow effect is 25% of this amount.

    August 15, 2023 at 2:01 pm #689965
    nivlay
    Participant
    • Topics: 1
    • Replies: 1
    • ☆

    Thank you sir!

  • Author
    Posts
Viewing 3 posts - 1 through 3 (of 3 total)
  • The topic ‘Question on Chapter 14 Example 1 NPV Answer’ is closed to new replies.

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